The Co-operators offers sharia-compliant coverage

Until the late 2000s, many devout Canadian Muslims were in a bind when it came to buying insurance. Islam prohibits gambling and charging interest, so an insurer making certain investments with their premiums would definitely be out. But insurance “in Canada, it is kind of a must,” says Pervez Nasim, chairman of the Ansar Co-operative Housing Corp. “If somebody fell on the ice on the sidewalk [outside a co-op member’s house] and they sue, then there will be an issue.” So Ansar consulted Islamic scholars who agreed the faithful could buy third-party liability insurance. But that didn’t completely resolve the ethical dilemmas over corporate investments.

Then in 2008, Ansar partnered with the Co-operators to provide sharia-compliant insurance, or takaful, for homes. About 300 Ansar members from across the country now take part in the program, which doesn’t invest their premiums in haram (forbidden) industries, along with members of two other Islamic housing co-operatives. The Co-operators introduced sharia-compliant car insurance in 2009 and commercial coverage a few years after that.

“Policy-wise, it’s pretty standard,” says Leonard Sharman, a spokesperson for the Co-operators. Coverage is offered as group insurance, and the difference is that premiums are invested in shariacompliant mutual funds, which exclude bonds. OSFI regulations require insurers to invest responsibly, but “it’s not regulated that every individual’s premiums have to go into [bonds] and so that’s how it works out for us.”

Because takaful clients only make up a small portion of the Co-operators’ portfolio, the insurer can easily allocate such investments elsewhere, but that wouldn’t work if clients interested in takaful became a majority. So “we’re not looking actively to expand it,” says Sharman. But the Co-operators’ products still aren’t fully sharia-compliant. “For one thing, we don’t have a profit-sharing mechanism.”

Takaful policyholders are supposed to be shareholders, explains Nasim, but he’s having trouble finding a mutual insurer to partner with. Until then, Muslims, and other Canadians interested in this type of ethical investments, have “this hurdle to cross.”

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Copyright 2015 Rogers Publishing Ltd. This article first appeared in the May 2015 edition of Canadian Insurance Top Broker magazine